Daily Management Review

Vatican and the Bank of Italy signed a key agreement


07/27/2016


Vatican and the Bank of Italy have signed a key agreement on cooperation aimed at regulating their relations after years of Italy’s mistrust to Vatican’s financial affairs.



This agreement, signed by Head of Bank of Italy, Ignazio Visco, and Head of the Bureau of Financial Information, Rene Bruelhart, was concluded prior to introduction of financial reforms, most of which was carried out under the guidance of Pope Francis. The deal is supposed to bring the Vatican Bank in line with international standards, as well to increase transparency and combat money laundering.

The joint statement reads that the agreement "aims to stimulate mutual exchange of information in the financial sector." It "allows the authorities to expand the channels of information" in order to keep track of transactions between the Italian financial institutions and Vatican, which is an independent state in the heart of Italy.

In 2010, Italian banks had stopped working with the Vatican Bank, officially known as the 'Institute for the Works of Religion ", after the Bank of Italy said that they needed to introduce strict measures against money laundering.

The same year, Roman authorities were investigating possible cases of money laundering. During the process, they froze account in the total amount of 23 million euros, which have been stored "by the Institute of Religious Affairs" in two Italian banks.

"Institute for the Works of Religion", in turn, said at the time that it had been simply transferring their funds between accounts in other countries. Later, it managed to return the frozen assets.

In 2012, Italy has blocked use of debit and credit cards in Vatican due to lack of transparency. This measure caused serious damage to Vatican’s economy since its significant source of income are tourists, mostly coming from Italy to visiting the Vatican Museums. Their credit cards were one of the city-state’s the most important sources of income.

In recent years, relations between the Vatican and the Italian financial authorities began to improve.

In 2013, the Bank of Italy's Financial Intelligence Department signed an agreement with their Vatican counterparts. Above that, they concluded a separate agreement on the exchange of financial information with the Italian tax authorities, in which the Holy See has promised full co-operation and transparency.

For many years, Vatican City has been criticized by financial institutions. They regarded Vatican as a tax haven for wealthy Italians, allowing them to keep secret bank accounts.

Pope Francis has made financial reform a guiding principle of his reign.

Under his leadership, the "Institute for the Works of Religion" has closed thousands of accounts during the last few years. He also has promoted independence and powers of the Financial Intelligence Department of the Vatican.

The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism - MONEYVAL – previously used to subject Vatican to harsh criticism. In December last year, however, the institution released an unexpectedly positive report, noting that the Holy See has made great progress in the issue of anti-money laundering.

However, the report also noted that Vatican’s court system needs to be tougher with people suspected of committing financial crimes such as money laundering, and to be more determined to institute prosecutions and convictions. 

source: bloomberg.com






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